Global Economics

Obama Disavows Trade War with Europe

Responding to criticism of the Buy America clause in the $900 billion stimulus package, the President said he was eager to avoid being protectionist

After a flurry of European criticism concerning a 'Buy America' clause contained in the almost $900 billion stimulus plan, US president Barack Obama said Tuesday (3 February) that he is keen to avoid a trade conflict.

"I think we need to make sure that any provisions that are in there are not going to trigger a trade war," he told TV network ABC.

"I think it would be a mistake though, at a time when worldwide trade is declining, for us to start sending a message that somehow we're just looking after ourselves and not concerned with world trade," he told Fox News in a separate interview.

The response comes after mounting European criticism of the proposed measure that would prohibit foreign steel companies bidding for US infrastructure contracts financed by the stimulus plan.

On Monday the EU's economy commissioner Joaquin Almunia warned that he was unhappy with "the clearly protectionist measures" currently being debated in the US.

Likewise John Bruton, the EU's ambassador to the US, warned on the same day that the 'Buy America' proposals would send out the wrong message to the world and undermine confidence in Barack Obama.

Urged on by Eurofer, the European confederation of iron and steel industries, senior EU officials have signalled a willingness to challenge the measure in the WTO on the grounds that it contravenes current trade agreements.

At present, the WTO is monitoring a group of countries including Indonesia, Argentina, Russia and India who have all either adopted or considered similar schemes for their steel sectors.

On Tuesday, German Chancellor Angela Merkel added her voice to the increasing criticism, telling reporters "we must avoid protectionism."

Yet even as it sends out criticism of the US on protectionism, member states appear to be considering similar measures.

French plans to prop-up its ailing automobile sector are also purported to contain protectionist elements.

French industry minister Luc Chatel will meet commission officials on Wednesday to discuss the details of the plan.

On Tuesday, the Financial Times reported that the French government was planning to offer cheap loans to French car manufacturers on condition that they agreed to buy a minimum volume of car parts from local suppliers.

The automobile sector in France currently provides around 1-in-10 jobs, with most of these concentrated in part producer companies.